The National Statistical Office (NSO) on Friday released the gross domestic product numbers for April-June quarter, which showed India's GDP growth slipped to 6-year low of 5 per cent as compared to 5.8 per cent in the previous quarter, weighed down by slump in manufacturing output, weak consumer demand and deceleration in private investment.
Comparatively, China, which is a much larger economy than India, had recorded a GDP growth of 6.2 per cent during the April-June period, slightly lower than 6.4 per cent record in the previous quarter. With the subsequent decline in GDP growth, India has fallen further behind its neighbour in terms of economic growth.
India had already lost its title of the world's fastest growing economy to China in the previous quarter when its economic growth slowed to 5.8 per cent compared to Beijing's growth of 6.4 per cent.
The economies of India and China have grown rapidly over the past couple of decades, but a worrisome combination of development challenges and global trade tensions pose a threat to their economic outlook.
As of 2019, China and India are 2nd and 5th largest economies of the world, respectively, as per the World Bank's latest GDP rankings. Among Asian countries, these two emerging economies together contribute more than half of Asia's GDP.
The economic slowdown is likely to spoil India's hopes of becoming a $5 trillion economy in GDP terms by 2024.
The economic downturn has particularly hit auto, manufacturing and real estate sectors. The less-than-anticipated GDP growth rate puts further pressure on the Modi government to announce meaningful reforms that can bring back the economy on growth trajectory.
"The growth slowdown was led by private final consumption expenditure, which grew 3.1 per cent only (18 quarter low). Investment demand also remained lackluster and fixed capital formation grew 4.0 per cent (4QFY19: 3.6 per cent). Only government expenditure provided support to growth and increased by 8.8 per cent," Fitch Group's India Ratings and Research chief economist Devendra Pant said.
"Ind-Ra believes both structural and cyclical issues are plaguing Indian economy and in order to bring the economy back to a respectable growth path both short-term and long term measures are required," he noted.
Prior to announcement of GDP numbers, Finance Minister Nirmala Sitharaman on Friday announced its second of the three-part stimulus, merging 10 public sector banks into four with a view to boost credit to help revive the economy.
Edited by Chitranjan Kumar